the Federal Reserve should get back to its core business of responsibly managing our money supply and inflation. It needs to get out of the business of bailouts. The Fed needs to return to protecting the purchasing power of the dollar. A strong dollar will reduce energy and food prices. It will stimulate sustainable economic growth and get this economy moving again.
The second sentence basically advocates that the government should allow the current financial crisis to worsen. On this one, Brad DeLong needs the microphone:
Since before 1844 central banks have been in the business of managing financial crises. That's what they do. Milton Friedman is spinning in his grave. The prevention of large-scale bank failures--"bailouts," in McCain's terms--is an essential part of responsibly managing the money supply. John McCain does not know that. And nobody working for John McCain knows that
The call for a strong dollar is a call for higher interest rates and dollar appreciation. How will discouraging investment and reducing net exports lead to an increase in aggregate demand is beyond me. I’d like one of McCain’s economic advisors to explain that!
1 comment:
Progrowth Lib said: "The call for a strong dollar is a call for higher interest rates and dollar appreciation. How will discouraging investment and reducing net exports lead to an increase in aggregate demand is beyond me. I’d like one of McCain’s economic advisors to explain that!"
The trouble is that a call for a weak US dollar is a call for high commodity and oil prices.
The world needs a new reserve currency (for international trading) that doesn't suffer from such a dilemma. It would also be wise to keep in mind that a huge percentage of international trade is not 'trade' per se but intra-corporate transactions.
Except in the case of essential raw materials trade would be better performed domestically, IMHO. Economic activity needs to be redirected to the provision of 'needs' instead of superfluous (profit-rich) consumption.
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